Chevron USA. Inc v. Aker Mar. Inc, 07-31117.

• Decision Date: 27 April 2010
• Docket Number: No. 07-31117.,07-31117.
• Citation: 604 F.3d 888
• Parties: CHEVRON USA, INC., Plaintiff-Appellee-Cross-Appellant,v.AKER MARITIME, INC.; Technip Offshore Engineering, Inc.; Technip Offshore Moorings, Inc.; Technip Offshore, Inc., Defendants-Appellants,T-3 Custom Coating Applicators, Inc., formerly known as LSS-Lone Star-Houston, Inc., Defendant-Appellant-Cross-Appellee,v.Tech OFCO; Oceaneering International, Inc., Defendants-Appellees.
• Court: U.S. Court of Appeals — Fifth Circuit

604 F.3d 888

CHEVRON USA, INC., Plaintiff-Appellee-Cross-Appellant,

v.AKER MARITIME, INC.; Technip Offshore Engineering, Inc.; Technip Offshore Moorings, Inc.; Technip Offshore, Inc., Defendants-Appellants,T-3 Custom Coating Applicators, Inc., formerly known as LSS-Lone Star-Houston, Inc., Defendant-Appellant-Cross-Appellee,

v.Tech OFCO; Oceaneering International, Inc., Defendants-Appellees.

No. 07-31117.

United States Court of Appeals, Fifth Circuit.

April 27, 2010.

Laurence E. Best, Mark Edward Best (argued), Peter S. Koeppel, Best Koeppel Traylor, Susan R. Laporte, Curry & Friend, P.L.C., New Orleans, LA, for Aker Maritime, Inc., Technip Offshore Engineering, Inc., Technip Offshore Moorings, Inc. and Technip Offshore, Inc. Michael Anthony McGlone (argued), Michael John O'Brien, Jr., Kean, Miller, Hawthorne, D'Armond, McCowan & Jarman, L.L.P., New Orleans, LA, for Oceaneering Intern., Inc.

Miles Paul Clements (argued), Paul C. Thibodeaux, Frilot, L.L.C., Louis Matthew Grossman, Michael Raudon Phillips, Kean, Miller, Hawthorne, D'Armond, McCowan & Jarman, L.L.P., New Orleans, LA, for Chevron USA, Inc.

Andrew A. Braun, Daniel G. Rauh (argued), Gieger, Laborde & Laperouse, L.L.C., Heather M. Valliant, New Orleans, LA, for T-3 Custom Coating Applicators, Inc.

Appeal from the United States District Court for the Eastern District of Louisiana.

Before JOLLY, BARKSDALE and PRADO, Circuit Judges.

E. GRADY JOLLY, Circuit Judge:

The Genesis Spar, an oil production facility, sits 150 miles south of New Orleans in the Gulf of Mexico. A riser system attaches the floating spar to the ocean floor, 2,600 feet below. The hub of this appeal, indeed of this entire multiparty dispute, is the failed bolts used to secure the riser system. Chevron USA, Inc. (“Chevron”), the part-owner and operator of the Genesis Spar, sued several parties to recover its costs resulting from the replacement of the failed bolts. The dispute presented by this appeal is primarily between Chevron and T-3 Custom Coating Applicators, Inc. (“Lone Star”), the distributor and vendor of the bolts. The case was tried to a jury, which returned a verdict, against several of the parties, in favor of Chevron for nearly $3 million in damages. The jury found Lone Star liable based upon its status as a negligent vendor and, secondly, as an apparent manufacturer of the bolts, making it liable under the Louisiana Products Liability Act (the “LPLA”), La.Rev.Stat. § 9:2800.51 et seq. , and in redhibition, La. Civ.Code art. 2545. The jury assigned 35 percent fault against Lone Star for Chevron's damages. Based on the jury's determination that Lone Star was liable under Louisiana's redhibition articles, the district court required Lone Star to pay a portion of Chevron's attorney fees. We hold that the evidence was sufficient for the jury to find Lone Star liable as an apparent manufacturer and we AFFIRM the judgment for damages. We REVERSE the finding that Lone Star is liable under the Louisiana redhibition articles and VACATE the judgment of attorney fees. At the outset of the trial, the parties' contractual claims were reserved for determination by the district court, which essentially dismissed them after the jury returned its verdict in favor of Chevron. We REMAND the contract claims to the district court for further consideration.

I.

Chevron hired Aker Maritime, Inc. (“Aker”)¹ in 1998 to provide design and engineering services for the initial construction of the riser system. Stability problems plagued the riser system after its completion, leading to a crack in the spar's hull in 2000. Oceaneering International, Inc. (“Oceaneering”) repaired the hull at Chevron's request, and Chevron put Aker in charge of designing a permanent fix. Large bolts called carriage bolts hold the riser system together, and Aker ordered the bolts from Lone Star, according to testimony a “well-known” bolt manufacturer that also distributed others' bolts. Aker initially requested eight-inch Grade 5 carriage bolts, which Chevron had approved. When Lone Star responded that it had no Grade 5 bolts, Aker placed an order for 2,092 Grade 2 carriage bolts, costing a total of $878.64. Instead of shipping Grade 2 bolts, Lone Star shipped Grade A bolts ² manufactured by Oriental Fastener Co. (“Oriental”).³ At the time, Lone Star routinely substituted Grade A bolts for Grade 2 bolts, then a widespread practice in the fastener industry.

Lone Star shipped the bolts to Oceaneering, which was in charge of assembling the risers. The bolts were marked “OF,” indicating the manufacturer, and arrived in shipping boxes bearing the Lone Star mark. They also arrived with a packing slip noting that they were either “manufactured or distributed” by Lone Star. Oceaneering accepted the bolts, failing to notice the substitution.

The first bolt failure occurred on July 9, 2001, when a bolt head popped off one of the first bolts used in the risers. Jack Couch, the project manager for Oceaneering, contacted Aker's Mike Harville and told Harville that he thought the bolts were a “serious weak link.” Couch took a picture of the failed bolt and sent it to Harville. Harville told Oceaneering that it had applied too much torque to the bolt, as Oceaneering was applying torque to Grade 2 bolts that it believed to be Grade 5 bolts. Oceaneering continued assembly of the riser system using the torque appropriate for Grade 2 bolts, apparently without incident. In August 2001, however, Aker took over riser assembly, and Oceaneering sent the parts, including the bolts, to Aker. Like Oceaneering's employees, Aker's employees failed to detect that the bolts were Grade A bolts.

After Aker completed installation of the riser system, Oceaneering divers inspected the construction on July 12 and 13, 2002. During the dives, live audio and video were fed to a room aboard the Genesis Spar, where Chevron representatives could see and hear everything the divers saw. As documented in Oceaneering's diving logs, the video inspection showed several bolt heads were missing. In addition, Harville testified that a Chevron employee, Bill Donahue, called him regarding a problem with bolt installation, likely on Sunday, July 14.

In the next month, Aker, Oceaneering, and Chevron representatives investigated the bolt failures. During the review, the team discovered that the bolts were Grade A, not Grade 2. It later determined that not only were the bolts the wrong kind, they were also defective due to a defective manufacturing process, including failure to stress-relieve the bolts and to heat-treat them.

Chevron sued on July 15, 2003, a year and a day after the Oceaneering dives, but less than a year after it completed its investigation. Its complaint included claims for negligence, strict liability, redhibition, products liability, and breach of contract. Aker brought claims for indemnity against Oceaneering and Lone Star. To avoid inconsistent verdicts, the parties agreed to try all the claims other than the contract claims to a jury, after which the district court would make factual findings based on the trial record and render judgment on the contract claims. The jury returned a verdict in favor of Chevron on all claims. It found that none of Chevron's claims were prescribed. As to negligence, it found Aker, Lone Star, Oriental, and Oceaneering were all negligent and it apportioned fault under La. Civ.Code art. 2323: 40 percent to Aker,⁴ 35 percent to Lone Star, 5 percent to Oceaneering, and 20 percent to Oriental. It determined that Lone Star and Oriental were manufacturers and imposed liability in redhibition and under the LPLA. Finally, it determined that Chevron's total damages were $2,968,526.42.

On September 12, the district court determined that “[t]he jury verdict clearly, and in all respects, trumps the so-called ‘contractual issues.’ ” In the same order, it directed the magistrate judge to determine the attorney fees owed by Lone Star and Oceaneering under La. Civ.Code art. 2545 and noted, “It seems to me that the [Lone Star and Oriental] should split the amount due by the percentage of fault the jury attributed to each; and that the total fee should only cover that part of the recovery attributed to the liability of the two manufacturers.” On October 12, the district court entered judgment, apportioning the damages according to the jury's fault allocation, regardless of the theory of liability. Lone Star and Aker moved for judgment as a matter of law, which the district court denied. Chevron, Lone Star, and Aker timely appealed.

On January 2, 2008, the magistrate judge recommended $431,906.63 in attorney fees for Chevron. After reviewing the relevant Louisiana case law, he concluded that Oriental and Lone Star should be solidarily liable for the amount. The district court delayed consideration of the magistrate judge's recommendation pending the Louisiana Supreme Court's decision in Aucoin v. Southern Quality Homes, LLC, 984 So.2d 685 (La.2008), which it hoped would resolve whether co-defendants are solidarily liable for damages in redhibition. Because the supreme court did not reach that issue id. at 693, the district court simply confirmed its original impression that Lone Star and Oriental should split the fees according to fault in a February 29 order. On March 18, it entered judgment, with Lone Star to pay $151,167.32 and Oriental to pay $86,381.33. Chevron would not be able to collect the remaining $194,357.98 in attorney fees. Chevron timely appealed this judgment.

Before oral argument, Chevron and Aker reached a settlement, in which Aker paid a sum to Chevron but admitted no fault, after which those parties voluntarily dismissed their appeals insofar as they were adverse to one another. Remaining before us are three parties' appeals: Lone Star's, contending that Chevron's claims against it are prescribed, that insufficient evidence supports the jury's verdict, and that its LPLA liability precludes an award of attorney fees in...